Papua New Guinea flags talks stall with Exxon on $13 billion gas expansion

MELBOURNE (Reuters) - Papua New Guinea's petroleum minister on Friday flagged a standoff in talks with Exxon Mobil Corp XOM.N tied to a $13 billion gas expansion, saying the U.S. oil giant was unwilling to negotiate on the country's terms.

FILE PHOTO: A logo of Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil September 24, 2018. REUTERS/Sergio Moraes

The state’s negotiating team had set out draft terms for negotiations on developing the P’nyang gas field, which Petroleum Minister Kerenga Kua said were in line with international standards and would ensure a “fair deal” for PNG.

“It is disappointing Exxon has refused to even consider these terms and we urge them to reconsider their position,” Kua said in a statement emailed to Reuters.

The new delay to the P'nyang agreement will make it harder for Exxon and its partners Total SA TOTF.PA, Oil Search OSH.AX and Santos Ltd STO.AXZ to reach a final investment decision in 2020 on their plans to double LNG exports from the country.

Exxon Mobil’s PNG spokesman said disccusions with the PNG government were ongoing and an agreement was needed before decisions could be made on preliminary engineering and design for the expansion of its PNG LNG plant.

“As a matter of practice, we don’t comment on commercial discussions,” the spokesman said in emailed comments.

The P’nyang agreement is one of two agreements needed for Exxon and its partners to go ahead with their $13 billion plan to expand LNG exports. The other agreement, the Papua LNG pact, was sealed with Total in September.

PNG’s new government came to power in May promising to extract greater benefits for the impoverished Pacific nation from its abundant energy and mineral resources. Kua had flagged the state would press Exxon for better terms than it had secured from Total.

A person close to the negotiations said Exxon had refused to disclose cost details and other information that the government needed in order to gauge what would make up a fair share of revenue for the country.

“The state wants to tell Exxon that until such time as it’s ready to provide that information and negotiate on the basis of PNG law and its suggested terms, then we’ll suspend the discussions until that time. Hopefully it won’t be too long,” said the person, who declined to be named due to the sensitivity of the issues.

He said the state was concerned that Exxon might hold back developing the P’nyang project for several years.

“The primary issue is making sure PNG gets its fair share and that it’s consistent with international best practice and the field is developed in a reasonable amount of time,” he said.

Reporting by Sonali Paul; Editing by Himani Sarkar and Richard Pullin